Business executives’ service on UK government boards and firm performance does “insiderness” matter?

Abstract The corporate political activity literature suggests that business executives’ personal service in government creates bureaucratic capital which can be deployed in ways that favour private firms. We investigate whether there are firm-specific benefits for UK companies with executives simultaneously serving as non-executive directors (NEDs) on the corporate governance boards responsible for the oversight of UK government agencies. We also explore whether these benefits are greater for firms that have “insider” status – FTSE100 companies. To estimate potential firm-specific benefits from executives’ service on government boards, we employ a novel database of the NEDs sitting on the departmental and agency boards in UK central government for the period 2008-21. Information on these NEDs is supplemented with data on market and financial performance, and tax liabilities for a large sample of UK-registered companies. Our statistical results indicate that firms with executives simultaneously serving as NEDs on government boards have higher market capitalization, higher turnover and lower taxation. Further analysis indicates that the benefits of executive board service in government are particularly strong for FTSE100 companies, but that for these companies such service may be associated with weaker profitability.